Nigerian consumer firms struggling to sustain cashflow amid headwinds

Consumer firms in Nigeria are struggling to sustain cashflow amidst rising interest rates which have a direct impact on their loans and borrowings, rising inflation, and naira devaluation, amongst other macroeconomic headwinds.

The consumer firms include Cadbury Nigeria Plc, Unilever Nigeria Plc, Dangote Sugar Refinery, Nestle Nigeria Plc, Nascon Allied Industries, BUA Foods, Nigerian Breweries, and International Breweries.

These companies have a negative cumulative cash flow used in financing activities of N30.25 billion in the first half of 2022, a 62.44 percent decline from an aggregate of negative N80.53 billion in the first half of 2021.

A negative net cash flow used in financing activities can mean the company is servicing debt, but can also mean the company is retiring debt or making dividend payments and stock repurchases, while a positive net cash flow used in financing activities means more money is flowing into the company than flowing out, which increases the company’s assets.

Cash flow from financing activities (CFF) is a section of a company’s cash flow statement, which shows the net flows of cash that is used to fund the company’s activities. The line item on the cash flow statement provides investors with insight into a company’s financial strength and how well a company’s capital structure is managed.

Cadbury Nigeria Plc

Cadbury Nigeria Plc, a listed food and beverage maker on the Nigerian Stock Exchange reported a positive cash flow used in financing activities, suggesting that its cash inflow exceeded its cash outflow during the first half of 2022.

The food and beverage maker reported a net cash flow used in financing activities to the tune of N2.18 billion in the first half of 2022, a 47.34 percent improvement over the negative cash flow used in financing activities of N4.14 billion in the first half of 2021.

During the period, cash inflow from financing activities for the company was generated from loans drawn down which amounted to N3.32 billion in the first half of 2022. The FMCG company also recorded borrowings of N12.87 billion in the first half of 2022, a 68.24 percent increase over N7.65 billion reported in the first half of 2021.

Part of the cash outflow made by the company from financing activities in the first half of 2022 was loan repayment which amounted to N1.05 billion, and lease liabilities amounting to N7.38 million. Its finance costs surged by 266.07 percent to N205 million in the first half of 2022, up from N56 million in the corresponding quarter of 2021.

Nestle Nigeria Plc

Nestle Nigeria Plc reported a positive net cash flow used in financing activities of N3.09 billion in the first half of 2022, a 115.92 percent increase over negative N19.41 billion reported in the first half of 2021.

The FMCG company recorded more cash inflow than cash outflow from financing activities during the period. Its cash inflow during the period came from proceeds obtained from intercompany and bank loans which amounted to N12.88 billion and N7.33 billion respectively.

Nestle’s borrowings in the first half of 2022 surged by 78.46 percent to N92.64 billion from N51.91 billion in the corresponding period of 2021. During the period the company repaid a bank loans worth N4.44 billion, which formed part of its cash outflow.

Other financing activities which formed part of its cash outflow include dividends paid (N5.27 billion), finance costs (N6.97 billion), and lease payments made during the period (N445.03 million).

Dangote Sugar Refinery

Dangote Sugar Refinery, in its recently released half-year 2022 financial statement, reported negative cash flow from financing activities of N12.25 billion, a 37.11 percent decrease from negative N19.48 billion reported in the first half of 2021.

The reason for the decline and negative figure in the first half of 2022 was due to the absence of cash inflow and dividends worth N12.15 billion paid to shareholders, and interest worth N107.12 million paid during the period.

The sugar maker, in the first half of 2022, reported borrowings worth N877 million, a 10.87 percent decline from N984 million reported in the first half of 2021. Finance costs recorded by the company during the first half of 2022 surged by 52.29 percent to N7.31 billion from N4.80 billion reported in the corresponding period of 2021.

Unilever Nigeria Plc

Unilever reported negative cash flow from financing activities amounting to N397 million in the first half of 2022. Data from its financial statement available on the Nigeria Exchange Group show that the company did not partake in any financing activity in the same period last year.

The FMCG company did not also generate any inflow from financing activities during the period. However, the cash outflow from financing activities was from interest payment and dividends paid during the period which amounted to N75.7 million, and N321.4 million respectively.

Data also show that the company did not record any borrowings during the period. However, finance costs recorded in the period increased by a whopping 1,297.8 percent to N629 million from N45 million in the corresponding period of 2021.

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Nascon Allied Industries

Nascon Allied Industries’ cash flow from financing activities amounted to N417 million in the first half of 2022, a 133 percent increase from the negative cash flow from financing activities of N1.25 billion in the corresponding period of 2021.

A large chunk of its cash flow from financing activities came from proceeds got from borrowings totaling N1.63 billion during the period. The company also paid dividends and lease liabilities in the first half of 2022 amounting to N1.06 billion and N150.8 million respectively.

Nascon’s borrowings in the first half of 2022 surged by 4,182 percent to N1.67 billion from N39 million in the corresponding period of 2021. Its finance costs also spiked by 1117 percent to N146 million in the first half of 2022 from N12 million in the first half of 2021.

BUA Foods

BUA Foods’ cash flow from financing activities grew by 43.2 percent to negative N21.48 billion in the first half of 2022 from negative N15 billion reported in the first half of 2021. Its only cash inflow derived from financing activities was generated from proceeds got from borrowings which amounted to N26.42 billion in the first half of 2022.

The FMCG company’s repayment of borrowings, payment of lease liability, and payment of interest amounted to N42.57 billion, N3.18 billion, and N2.15 billion respectively formed its cash outflow. The company’s borrowings and finance costs during the period amounted to N230.16 billion and N4.09 billion respectively.

Nigerian Breweries

Nigerian Breweries reported a positive cash flow from financing activities of N50.39 billion in the first half of 2022, from a negative cash flow from financing activities of N28.71 billion reported in the first half of 2021.

The company repaid borrowings worth N69.09 billion, interests amounting to N1.77 billion, dividends amounting to N5.58 billion, and lease liability amounting to N105 million. It also received proceeds from borrowings during the period totaling N11.38 billion.

The beer maker’s borrowings in the period grew to N87.97 billion, a 37.99 percent increase from N63.75 billion reported in the first half of 2021. Its finance costs, however, declined by 36.02 percent to N3.09 billion in the first half of 2022 from N4.83 billion in the corresponding period of 2021.

International Breweries

International Breweries reported a negative cash flow from financing activities of negative N66.84 billion in the first half of 2022 from negative N822 million in the first half of 2021.

This was largely due to the repayment of borrowings made during the period which amounted to N62.32 billion, and interest paid amounting to N4.52 billion. Its total borrowings for the first half of 2022 amounted to N110.8 billion, a 2.51 percent decline from N113.65 billion in the first half of 2021. The beer maker’s finance cost increased by 506 percent to N5.78 billion in the first half of 2022 from N954 million in the corresponding period of 2021.